• Revenue: Fourth quarter 2024 consolidated revenues were approximately $186 million.
• Adjusted EBITDA: Fourth quarter 2024 adjusted EBITDA was $161 million with an adjusted EBITDA margin of 87%.
• Diluted Earnings Per Share: Fourth quarter 2024 diluted earnings per share was $5.14.
• Free Cash Flow: Record free cash flow of approximately $461 million for full year 2024, an 11% year-over-year increase.
• Oil and Gas Royalty Production: Increased 14% year-over-year for full year 2024.
• Water Sales Volumes: Increased 31% year-over-year for full year 2024.
• Produced Water Royalty Volumes: Increased 37% year-over-year for full year 2024.
• Royalty Production: Fourth quarter 2024 royalty production was approximately 29,100 barrels of oil equivalent per day, an 11% increase year-over-year.
• Produced Water Royalty Volumes: Fourth quarter 2024 volumes grew 44% year-over-year to approximately 4 million barrels per day.
• Sourced Water Sales Volumes: Fourth quarter 2024 volumes grew 42% year-over-year to 737,000 barrels per day.
• Shareholder Return: Record $376 million returned via dividends and buybacks in 2024.
• Dividend: Announced a regular dividend of $1.60 per share, a 37% year-over-year increase.
• Capital Expenditures: Expected to be approximately $65 million to $75 million for fiscal year 2025.
• Cash and Cash Equivalents: Approximately $370 million at year-end 2024.

• Warning! GuruFocus has detected 1 Warning Sign with TPL.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Texas Pacific Land Corp (NYSE:TPL) achieved record oil and gas royalty production volumes, increasing by 14% year-over-year in 2024.
• Water sales volumes rose by 31% and produced water royalty volumes increased by 37%, both setting corporate records.
• The company returned a record $376 million to shareholders through dividends and buybacks in 2024.
• TPL's strategic investments in technology and infrastructure led to a 23% increase in surface and water revenues.
• The company generated record free cash flow of approximately $461 million, an 11% increase from the previous year.

Negative Points

• Realized oil and natural gas prices declined year-over-year by 2% and 48%, respectively, impacting revenue.
• Despite a constructive outlook, Permian development and production remain heavily influenced by volatile oil prices.
• The company faces challenges in achieving cost-effective desalination, with energy consumption being a significant factor.
• There is uncertainty regarding regulatory changes that could impact disposal options in New Mexico.
• The deeper disposal wells in New Mexico are significantly more expensive, affecting overall disposal capacity.

Q & A Highlights

Q: Could you elaborate on the potential desalination synergies with behind-the-meter power generation and data centers? How advanced are your discussions on this opportunity? A: Robert Crain, EVP of Texas Pacific Water Resources, explained that the Permian Basin's power constraints present a transformational opportunity for data centers. The synergies include waste heat capture from power generation for desalination and addressing water demand with produced water. These elements together create a significant opportunity.

Q: Is the goal still 75% volume reclamation, 75% analyte removal at a cost of 75 cents per barrel for desalination? How confident are you in achieving this with a commercial scale facility? A: Robert Crain confirmed they are on track for the 75% targets. The main cost driver is energy consumption, and they are exploring natural gas generation to reduce costs. They are trending towards achieving all three targets.

Q: Where are you seeing the greatest opportunities today between royalties and surface assets? A: Tyler Glover, CEO, stated that the deal pipeline looks promising for 2025, with opportunities in both surface and mineral assets. They anticipate high-quality acquisition opportunities across surface, mineral, and water spaces.

Q: Could the Trump administration make any federal changes in policy that could open up more pore space in New Mexico? A: Tyler Glover mentioned that while it's possible, they are not aware of any regulatory changes that would impact New Mexico's disposal regulations. Robert Crain added that any changes would likely be at the state level rather than federal.

Q: How are you thinking about the turn-in-line quarterly run rate for oil and gas royalties in 2025? A: Chris Steddum, CFO, indicated that based on current inventory, they expect a robust number of wells to come online in 2025. This could potentially exceed past years' run rates, depending on oil prices and activity levels.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.